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Bid Price

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Key Highlights

  • Bid price is the maximum price a buyer (bidder) is prepared to pay for a security, asset, or commodity at a particular moment.

  • Bid Price = Buyer's Offer Price

What is Bid Price?

Bid Price is the maximum price a buyer (bidder) is prepared to pay for a security, asset, or commodity at a particular moment. It is half of a financial quote - the other half being the Ask Price, which is the minimum price a seller will accept.

Simply put, Bid Price = Buyer's Offer Price

How it Works?

In financial markets like stock exchanges, buyers and sellers submit bids and offers:

  • A buyer places a bid - the price they want to pay.

  • A seller sets an ask price - what they want to receive.

The transaction occurs only when the bid and ask match.

For example:

  • Buyer’s bid: ₹95
  • Seller’s ask: ₹100
    Since they don’t match, the trade won’t happen until one side adjusts.

Where You’ll See It?

  • Stock Market: Investors are shown bid prices when they want to sell shares — it indicates how much buyers are willing to pay.

  • Forex (Currency Markets): The bid price is what you'll receive if you sell one currency for another.

  • Bond Market: Institutional investors bid for bonds in auctions or over-the-counter transactions.

  • Commodity Markets: Bidding occurs for items such as gold, oil, or agricultural commodities.

Bid Price vs Ask Price

TermMeaningRole
Bid PriceHighest price a buyer is willing to payWhat sellers receive
Ask PriceLowest price a seller is willing to acceptWhat buyers pay

The difference between the bid and ask price is called the Bid-Ask Spread. A narrow spread means high liquidity; a wide spread means lower liquidity or higher risk.

Example

Let's say a stock is trading with the following quote:

  • Bid: ₹200

  • Ask: ₹202

This indicates:

  • Buyers are willing to pay ₹200 per share.
  • Sellers are looking for at least ₹202.
  • If you need to sell right away, you'd receive ₹200.

Why Bid Price Matters?

1. Assists Sellers: It indicates the maximum price they can receive right away.

2. Impacts Liquidity: Increased bid activity indicates increased interest in purchasing the asset.

3. Price Discovery: It is a key factor in establishing the fair market value of an asset.

4. Trader Decisions: Assists traders in determining the timing and price of trades.